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Thursday, May 16, 2013

Judgment reinstated against Wells Fargo in overdraft fee case

The U.S. District Court for the Northern District of California this week reinstated a $203 million judgment against Wells Fargo for slapping hefty overdraft fees on consumers by manipulating the order in which their charges posted to their accounts in order to maximize the number of transactions that would be subject to overdraft penalties. The court described the "Wells Fargo bookkeeping device known as 'high-to-low' posting" as follows:

In practice, processing account debits received by the bank each day in high-to-low order [as opposed to chronological order] multiplied the overdraft fees collected by the bank by depleting the account as fast as possible and turning what might otherwise be a single overdraft into as many as ten.

The judge's previous order that Wells Fargo pay restitution was vacated on appeal when the Ninth Circuit held that certain California state-law theories were preempted; the court today reinstated the restitution award on the basis of a different state-law theory that the Ninth Circuit had left open.